Aviation could suffer from a waning US jobs sector although it will benefit from lower oil prices, IATA chief economist Marie Owen Thomsen told the Airlines 2024 conference.
Delegates at the annual event in London were told that aviation has benefitted from a strong global services sector since the early 60s that has driven up wages.
She said this has offset any negative impact from inflation, but warned that there are growing concerns about the jobs market in the US which has seen record employment levels.
“Support we have had from the labour market is slowly waning,” Thomsen said, who added the US Federal Reserve is concerned about the impact of job creation.
On the flip side, the aviation sector is benefitting from reduced jet fuel prices as refineries see reduced demand for diesel as countries like China turn to natural gas for domestic vehicles.
As a sector, aviation accounts for just 8% of global refinery demand meaning refineries can “maximise their profits without us”.
Lower energy prices will support central banks in reducing interest rates, although there may be “over-optimism about how low they can go,” added Thomsen.
IATA says it is seeing “really strong” activity in the air cargo sector due to sea freight disruption and “exuberant” e-commerce demand which is now exceeding the domestic passenger sector.
There are continuing constraints due to delayed new aircraft deliveries and supply chain issues, but Thomsen said this was a “double-edged sword” that may help “save airlines from themselves”.
While the ongoing issues at Boeing and other OEMs has put a “cap on growth”, Thomsen said airlines do have a tendency to “overinvest” in new aircraft.
Production of sustainable aviation fuel (SAF) will have to increase 1,000-fold by 2030 if the aviation industry is going to meet its requirements to reduce its carbon emissions, IATA estimates.
This year around one million tonnes of SAF will be produced, just 1% of the total amount of jet fuel consumed in a year.
“It’s a tiny, tiny nascent market trying to take its first steps in the universe and it needs a lot of help. It needs to grow up very fast,” said Thomsen.
IATA believes with greater co-processing of SAF with traditional carbon fuels, 5% of SAF requirements could be met without increasing the current refinery capacity.
“If you can solve aviation’s decarbonisation problems, we will go a long way to solving the decarbonisation problems of everyone else,” Thomsen said.
She added that if governments commit a similar investment to incentivise SAF production as they have done for wind and solar power the sector’s requirements will be met.
In total $4 trillion to $8 trillion CAPEX investment is required with aviation’s slice amounting to £2 trillion to $3 trillion.
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